Talking about the housing finance schemes, there is four type of credit facilities available: (1) Home purchase loan, (2) Home construction loan, (3) Land purchase loan, and (4) Home improvement loan. Now, people know about Home Loan and they are likely to face no issues while availing it. However, a Land Purchase loan is something different and the conditions here differ compared to other housing schemes. Take a look below to find out.
- The Construction Clause: Land purchase loan comes with a clause which says the construction needs to commence within the stipulated time sanctioned by the lender. This construction clause varies from one bank to another and is always mentioned in the proposal.
- Loan-to-Value Ratio: Loan to value ratio is the ratio of your property’s value (the current market value of the land you are purchasing) to the money you can borrow from the lender. In general, the lender allows only 50-60% of the property’s value to be borrowed as a loan.
- EMI Amount Vs Loan Tenure: Land purchase loan is available for a short tenure which results in higher EMI. Hence, calculate the incurring EMIs of your loan beforehand and ensure you can manage to pay it easily.
- Tax Benefits: Lastly, the tax rebate available on Home Loan might not be similar in case of land purchase loan. Hence, check them out first and prepare your loan application accordingly.
Reference Read: Factors that should be considered for Land Loans